Interferry Conference Summary

Interferry Forum Urges Pro-active
Approach to Industry Challenges

Interferry News Release, 18 October 2013

More than 250 top-level delegates attended trade association Interferry’s 38th annual conference in Malta to debate the major factors affecting ferry operations around the world. Under a new format mixing presentations with panel discussions and audience input, the event underlined the diversity of political, technical, operational and commercial issues challenging the industry.

Among several sessions focused on safety, a former airline pilot confirmed the alarming certainty of human error, an award-winning academic criticised a ‘gaping chasm’ in damage stability regulations – and a leading insurance broker explained why passenger ferry reinsurance costs are soaring due to cruise ship casualties. Environmental updates focused on emissions control and alternative fuels. Discussing regulatory concerns in both areas, speakers stressed the need for operators to be proactive in helping to shape workable rules.

Other topics ranged from manpower shortages to dealing with stagnant markets, prompting Interferry CEO Len Roueche to conclude: “Such a demanding legislative and business environment helps to explains why, with 13 new recruits this year, we now have 235 members in 37 countries. It has never been more important to have a global voice for the industry.”

‘Compelling’ Case for Ro-Pax Reinsurance Review
Based on loss experience over the last 20 years, ro-pax ferries are bearing an unfair share of costs allocated to passenger ships within the International Group of P&I Clubs reinsurance pool, according to data presented by Ben Abraham, head of global P&I at insurance broker Willis. He suggested there was a ‘compelling argument’ to differentiate between pure passenger ships and ro-pax ferries, where most carrying capacity is taken up by freight, because their catastrophe risk is so different.

Highlighting that loss records among the various vessel classes were key in allocating reinsurance costs, he said the 2013-14 passenger ship allocation had increased by 125%, largely due to the loss of the cruise ship Costa Concordia. This was the highest percentage increase in reinsurance costs since the ‘dirty tanker’ category was increased by 145% in 1982 in the aftermath of Exxon Valdez.

Costa Concordia had resulted in the International Group’s largest-ever loss, but roughly 85% of the total costs were related to wreck removal, which would be comparable for a similar sized vessel regardless of ship type. The casualty just happened to involve a passenger ship, but the wreck removal aspect would be common to any ship type.

“The increase meant, for example, that a 30,000gt ro-pax was faced with a US$52,500 premium increase in one fell swoop,” Mr Abraham revealed. “Over the last 20 years there have been five ro-pax claims into the pool amounting to $182 million. This represented only 13.6% of the total cost of passenger ship claims as at 20 February 2013, so there is a very good argument for a review of the ro-pax ferry allocation.

“Given that the risk implications of ro-pax and pure passenger vessels are completely different, there is no sense in allocating the same reinsurance rate per GT for each type of ship. The ro-pax sector appears to be bearing a disproportionate allocation of costs when related to their loss record.”

Safety – the Human Element
In a conference marked by wide opinion on various issues, one theme earned universal agreement – that the capacity for human error should be paramount in setting safety standards.

Former SAS airline captain Jarle Gimmestad, who now runs a self-named safety consultancy in Norway, provided stark evidence from the aviation industry, revealing: “Studies have shown that airline pilots make between three and five errors per hour of duty. We have stopped looking for pilots who don’t make errors – the culture and the system has to be right. The reason it’s so safe to fly is that we recognise it’s so dangerous.”

Accidents rates had fallen consistently during the jet age, with 2012 the safest ever. This reflected acceptance that safety is about managing human error. The ‘myth of the superb captain’ had been replaced by robust operating systems that encouraged a well functioning crew to speak up when their commander made mistakes. In addition, procedures had to be simplified – a well-documented crash in 2008 had occurred in sight of the airport because the crew were responding to smoke in the cabin by going through a 208-item checklist.

A panel discussion on ferry safety measures produced similar insights from operators. P&O Ferries fleet director John Garner said that, with 80% of accidents caused by the human element, it was vital to look beyond technical aids and address the ‘soft’ side in developing a company-wide safety culture. A 14-module maritime resource management course implemented four years ago had now been attended by more than 400 officers to help them avoid or mitigate incidents.

Jan Helge Pile, senior VP marine & technical at Color Line, also thought there was more to gain - and probably at lower cost - by focusing on the crew, while Grandi Navi Veloci president Roberto Martinoli added: “Focus on operational measures would definitely give better results. As an industry we believe we are over-regulated but when something happens we are going to be responsible even if we have all the certification – that’s part of our business whether we like it or not.”

Safety – Concerns over Design
Two speakers reminded delegates that prevention is better than cure regarding the safety aspects of ship design.

World-leading maritime safety authority Professor Dracos Vassalos, of the UK’s Strathclyde University, welcomed the introduction of goals-based rather than rules-based damage stability regulations, saying this opened the way for life-cycle risk to be addressed at the design stage.

But he expressed alarm over the ‘grandfather clause’ exempting existing ships from the new rules. “As a result the bulk of contemporary knowledge is channelled to new ships – 1% of tonnage – leading at best to marginal safety improvements for the whole fleet,” he claimed.

“This is a huge regulatory gap that undermines and inhibits progress on vulnerability to flooding – and the disparity between old and new ships is increasingly becoming a chasm.”

Interferry executive director of EU and IMO affairs Johan Roos warned that, in January, the IMO sub-committee on ship design and construction was expected to consider a proposal to increase the statistical survivability of new ships by adding more bulkheads. “We are deeply concerned that such a measure would jeopardise the entire ro-pax concept, possibly without adding to the actual safety level,” said Mr Roos.

“Interferry believes that, before adding more steel, much more emphasis should be placed on enhanced operational safety. Current regulations only credit physical alterations of designs. In our view, enhancements to an already very safe ferry system should focus on a different approach - not by trying to design a ferry that can withstand any plausible damage, but rather to avoid the accident to begin with. The expected proposal stems from extensive research that is currently under review by experts within the IMO. Their work is due for completion next year and we believe it should be allowed to conclude before any technical changes are proposed.”

Major Operators Join Lobbying Call
The need for operator involvement at the seats of power was emphasised in a session on Interferry’s growing consultative role – and echoed in a panel discussion on critical issues for large operators.

Johan Roos, Interferry’s executive director, said early liaison from the industry was vital to optimising future regulations on safety and the environment. “Regulators need our input to do good,” he asserted, “so the best thing we can do is to be with them before they start regulating.” He added that the many new challenges ahead made it crucial to raise the industry’s profile, pointing out: “Ferries carry more passengers than the global aviation industry, they are a clean and safe transport mode and they are essential infrastructure – European industry would collapse within days if ferries stop operating.”

Brussels-based Mr Roos was appointed in 2011, initially on a three-year term funded by five of the association’s major operators, who have since been joined by six more members. Hailing the success of the initiative, CEO Len Roueche said the Interferry board was committed to sustaining the role beyond 2014 and aimed to agree future funding by the middle of next year.

During the panel debate, Stena director Claes Berglund observed: “To be number two or three in a discussion is a very bad position. Either we accept and adopt whatever regulations are imposed, or we become more active in the process before decisions are made. That’s where we need to go because it’s too expensive not to be in that place.” Asked what the ferry industry can do ‘to avoid another Capt. Schettino’, he added: “As our owner Dan Olsson says, if you think safety is expensive, try having an accident.”

Helen Deeble, CEO of P&O Ferries, called for a united voice in dealing with governments, saying: “We need to be involved pre-regulation because he who shouts loudest wins. There is a fundamental conflict between our industry, which is essentially long-term, and the short-term objectives of politicians. Governments may be huge, unwilling to change course and focused on getting re-elected, but there are some good guys out there and we can promote our industry if we find them.”

Responding to a question on the supply of professional mariners, she went on: “We see it as such a serious issue that we have a succession plan. In the UK there was a 10-15 year period when there were not enough cadets. We now have 50 cadets in training. This is another area where we need to sell the industry better.”

Other panellists focused on ways of tackling stagnant markets in a depressed economy, which they expected to stay flat for at least two years despite signs of a slight recovery in freight business.

Mike Corrigan, president & CEO of British Columbia Ferries, described initiatives to compensate for falling passenger numbers, including a drop trailer service, package vacations, enhancing onboard spend and a reservations system that would enable yield strategies and differential pricing. “We don’t see the market turning round in the short term,” he admitted, “so our approach is a combination of revenue generation and smart cost management.”

Attica Group CEO Spiros Paschalis said long-term planning was jeopardised by the ‘unprecedented economic chaos’ in Greece. This had sparked government spending cuts, lack of bank support and reduced traffic volumes – down 37% in the Adriatic and 25% in the Aegean. The company had responded by entering joint ventures with other carriers, using smaller ships, renegotiating supplier contracts and tightening controls on fuel consumption and repair and maintenance costs. He went on: “We’re planning for zero growth until 2015, when we expect to see some improvement in both Greece and Italy – but this will probably entail some consolidation as smaller operators leave the market.”

A subsequent panel on critical issues for small operators revealed a raft of similar problems. Joe Gabriele, marine director of Malta’s Virtu Ferries, complained that certain regulations placed an unrealistic burden on operators. There was so much pressure on crews that ‘a watch-keeping officer on the bridge could sometimes forget to look out of the window’. Dealing with local government authorities was a major concern for London-based Thames Clippers managing director Sean Collins, who urged: “They need greater guidance on the role of river transport and the opportunities this brings to their communities.” Hume Campbell, CEO of Australia’s Riverside Marine, faced competition for labour because pay in the mining and offshore industries was twice as high and ‘young people don’t think shipping is sexy – they can’t go down to the docks and smell ships any more’.

Alternative Fuels Meet Emissions and Efficiency Challenge
Presentations from operators, suppliers and service providers highlighted the ferry industry’s innovative and varied approach to meeting targets on lower emissions and greater fuel efficiency.

Bjorn Rosengren, president & CEO of engine giant Wartsila, said using LNG was a clean, viable and reliable option that should no longer be a cause of concern regarding price, availability and safety. “We are convinced it will be one of the main marine fuels of the future and much of our R&D spend is dedicated to this,” he confided. The company already had a reference list of more than 200 marine and land-based installations with a total of 77 million running hours.

Gas prices made a ‘very convincing’ argument for LNG and the fuel was now easily available throughout Europe – with fears about lack of bunkering infrastructure being further eased by well-proven technology allowing ports to produce their own supplies through small scale liquefaction plants. Customised solutions for onboard storage had been developed, while questions about bunkering with passengers aboard were being answered by operational experience and a strong safety record, notably in Scandinavia. “Viking Grace is a benchmark,” Mr Rosengren concluded. “The ship is being bunkered six times per week during a one-hour stop in Stockholm.”

In contrast Per Westling, managing director of Sweden’s Stena RoRo, explained why the company is converting its 25-vessel fleet to methanol by 2018. It offered similar emissions reductions to LNG, was easy to store in regular tanks and prices looked stable for the foreseeable future. But as he added: “Conversion to methanol is considerably less expensive and basically just involves the fuel injection and tank ventilation systems. For LNG you have to change everything but the engine block and crankshaft. The environmental and cost benefits led us to methanol.”

Both fuels are among the options for the Green Ship of the Future, a study by 14 partners from the Danish maritime cluster that also covers machinery, propulsion and lightweight materials. Emissions and fuel reductions are being benchmarked against operational data from Destination Gotland’s MS Visby on service in the Baltic.

As DNV business & product development manager Claus Winter Graugaard revealed, potential emissions savings are almost 100% for SOx, more than 90% for Nox and 35% for CO2 – while fuel bills could be cut by 23%.

Per Egil Vedlog, design manager at the Rolls-Royce merchant ship technology centre in Norway, described his company’s Enviroship design agreement with Italy’s Lauro Shipping. The concept features a wave-piercing bow design producing 10% less resistance, a hybrid shaft generator and gas engines to reduce fuel consumption and an integrated propeller/rudder system that improves propeller efficiency by 4-8% and reduces hull pressure through added lift. The combination was said to reduce CO2 emissions by some 40%.

Scandlines technical and operations VP Claus Nikolajsen outlined a batteries and scrubber solution to saving fuel and meeting sulphur restrictions on four diesel-electric ships operating a half-hourly ten-mile crossing. The battery energy storage system enables one engine to run on full load while storing excess energy for release on demand. Mr Nikolajsen said the system had reduced fuel consumption by 15% and, in effect, paid for the scrubbers – while allowing their capacity to be cut from an estimated 10.5 MW to just 3.5 MW.

Safety in Developing Nations
Three presentations featured innovations with potential to improve ferry safety in developing nations. Leigh McCue-Weil, associate professor in Virginia Tech’s aerospace and ocean engineering department, demonstrated two mobile phone apps devoted to small craft motion and vessel drills. Rachel Hamada, editor of the Zanzibar culture and travel magazine Mambo, described a mobile phone check-in system - conceived by her with help from a technology expert – which provides passengers with data on vessel condition, overloading and weather.

In addition, results from an international student competition to design safe, affordable ferries were examined by Roberta Weisbrod, founder of New York-based consultancy Sustainable Ports and coordinator of Interferry’s part in a joint developing world safety initiative with the IMO. A team from the University of British Columbia won the competition, which was run by the Interferry-backed Worldwide Ferry Safety Association. Conference delegates responded positively to appeals from all three speakers for advice and assistance in progressing their projects.

Common Goals for Ocean Users
Companies involved in maritime operations should recognise that they have shared interests on ocean issues such as governance, spatial planning, waste discharge, conservation and weather data. That was the message from Paul Holthus, founding CEO of the World Ocean Council, the international business alliance for corporate ocean responsibility. “We are trying to help industries look beyond their sector of the ocean and overlap with others to think about their interactions,” he explained.

“Ocean industries will benefit from collaboration with other sectors to create synergies and economies of scale in addressing issues. This is a leadership opportunity for responsible companies based on compelling business value.”

Maltese Top and Tail
The conference welcoming address came from Malta’s 39-year-old Prime Minister Joseph Muscat, who recalled that, after taking office in March, he called for expressions of interest in a new maritime hub in Valletta’s Grand Harbour. Mr Muscat reported that 28 responses had been received, adding that a training centre would be central to the cluster in recognition of a Europe-wide shortage of maritime professionals.

The final act of conference proceedings was a special presentation to renowned maritime journalist Michael Grey, who was born in Malta to a naval family. He became only the fourth holder of Interferry’s Person of Distinction award, which marks long-standing support for the ferry industry. Previous recipients were former IMO secretary general Efthimious Mitropoulos, Incat founding chairman Robert Clifford and Karl Morten Wiklund, former passenger ships director at DNV.

Interferry, press release